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4. Evaluate which strategic management decisions SpiceJet should continue to support in
order to sustain profitability and achieve the company’s vision.
1) Focused LCC
- Foremost strategic issue is that SpiceJet has to move completely towards the low-
cost carrier (LCC) model. The LCCs keep their cost low by keeping a
homogeneous fleet which means same flight and technical crew be used for all
the aircrafts, thus reducing the overall costs. To get back to basic, the airline
focused on cutting cost through operational efficiency. SpiceJet optimized its route
strategy and cut down on unprofitable destinations. Besides, it targeted a
turnaround time of 25 minutes and enhanced its aircraft utilization to an industry
leading figure of 11.5 hours. Other cost reduction measures focused on inrease
fuel burn efficiency out ratio by flying at the right level and speed, increase in
capacity utilization, employee lay off and renegotiate of maintenance contracts. All
this led to an increase in the operational efficiency of SpiceJet while also reducing
the expenses.
2) Government support
- The government played a significant role in facilitating a lifeline for SpiceJet. It
helped rescind DCGA’s order on selling of advance tickets and backed SpiceJet in
all its negotiation with the vendors and other stakeholders including the banks. The
shut down of an airline which until recently has the second highest market share
could prove disastrous for the emerging Indian aviation market.
3) Fall in crude oil prices
- Fuel costs is the largest expenses for an airline. Naturally, a drastic drop in the
crude oil prices towards the end of FY14 and then on, brought down the the fuel
expenses as a proportion revenues by 45%. SpiceJet took this advantages to make
a turnaround and move into the profit zone which the revenues are over the
